China Construction Bank is still in "pre-marketing" (how this is distinguished from "marketing" has always eluded me, and I've done both) for an offering which will raise $7.7bn at the top of the pricing range, but the institutional tranche is already reportedly covered. Even allowing for the prevaricatory nature of all in ECM who speak on such issues....not a bad showing. (that's what MS/CSFB/CICC are calling you about)
Mizuho is taking advantage of the run-up in Japanese bank stocks to push out $4.7bn of shares (not new but held by an older liquidation vehicle) so as to repay past government support. (Nikko/Citi/Mizuho, + MS/ML will be ringing your doorbell on this one)
Lone Star's Tokyo Star Bank (formerly Tokyo Sowa) is also on the road with Japanese investors, looking to raise up to $798m in its IPO. (a Citi/Nikko/CSFB joint, with bookbuilding 10/4-10/14 and pricing 10/17)
ECM Tid-bits: ICICI Bank's Board meets next week to discuss raising additional capital. State-owned competitor Union Bank has already applied to the government for permission to sell 45m new shares. Standard Chartered Bank (Thai) also plans to bolster equity, but with new capital coming exclusively from the parent, you're out of luck if you want any.
]]>BNP ExCo member Alain Papiasse spoke to the SCMP yesterday in Hong Kong, disclaiming any desire on the part of the banking group to follow in the footsteps of RBS, HSBC, or BofA in plunking down large sums of cash on the mainland:
"The only thing that the group is not comfortable with is spending billions to invest in a small stake of anything," said Mr Papiasse. "If we are not in control, then we prefer a moderate investment."
He said there were now two types of foreign banks looking for opportunities on the mainland.
"The first type would try to invest a lot of money for a very small stake in a large national bank, while the second type would rather invest a small amount in a small regional bank. We definitely belong to the second group."
BNP further disclosed its interest in online (retail) broking in both China and India, and said that a China bank deal (thought as we have previously highlighted to be Nanjing City Commercial Bank) could be announced "within weeks."
]]>The merged Mitsubishi-Tokyo Financial Group and UFJ Holdings agglomeration is in effect today, with the new MUFJ (ugly abbreviation) trading on TSE (8306.JP) this morning. The world's largest bank sold off on its first day, closing down 4.7%.
]]>For a market which is closed today, Korea is putting on some serious news flow.
Hana Bank, which has also expressed interest in LG Card, has bolstered its shareholding roster today by selling a 9.4% stake in its new FHC (to be listed 12/1) to Goldman Sachs' private equity unit. GS had previously bought 5m shares in Hana Bank out of treasury stock (~2.5%). It's not clear whether the FHC shares will be new primary ones or taken from other holdings.
Hana is a quite good operation, and certainly GS is getting in cheap, but our worries about the FHC concept are stoked by the presentation below, which is heavily reliant on that old saw, "revenue synergies."
* Hana September IR Presentation
]]>Shinhan's CEO says that the bank (given that the remainder of the FHC is irrelevant, that's what it amounts to) is considering the purchase of LG Card, KEB, or both.
LG Card would likely be a good fit if done at a reasonable price; the card companies belong with banks so that they can cross-sell and enjoy stable funding. I would question whether Shinhan has the existing credit talent to keep the business from going tits-up again, but that caveat applies to almost any domestic bidder.
KEB is a head-scratcher. The obvious motivation is that its acquisition would make Shinhan significantly larger than Kookmin and Woori, and thus itself secure from takeover and able to bask in the prestige of being #1. However, the typical benefits of in-market merger would seem not to apply, given that Shinhan still has yet to integrate the last large bank it bought - Cho Hung.
I'm certain the unions won't be any more pleased about the prospect of integrating KEB with Shinhan Bank, so it would likely be another extended co-habitation under the FHC, which destroys any prospect of cost savings.
The silver lining for shareholders is that I don't see how Shinhan could finance the KEB purchase anyway - Lone Star is not going to take anything but cash on the barrelhead.
]]>New FMCG analysis shows that a key reason many bank acquisitions fall short of expectations is that buyers do not uncover organic revenue growth problems at the seller. Consequently, while agreeing to a deal price, the acquirer’s management does not fully appreciate that they are implicitly signing up for a heroic turnaround of an underperforming institution.
More after the jump:
]]>If, as a potential buyer, your retail organic revenue growth has been consistently strong and has been underpinned by distinctive customer value, you have higher odds of success in the M&A game. However, even for such banks, it is important to think twice if your target is in a region where it faces particularly strong competition.
Conversely, if your performance and that of the target are sub par, and management has a “must-win-this-deal” mentality, then a plan for how the target will be managed so as to be competitive in the market becomes paramount.
(via BankStocks)
]]>Like all financial-firm executives, finance chiefs of the country's regional banks are grappling with a rise in short-term rates even as long-term rates fall. This convergence of rates -- a bugbear that bankers call a flattening yield curve -- cuts profit margins by raising the banks' borrowing costs while lowering the rates they charge on loans to customers.
Perhaps it was not so much the positioning failure as the failure to accurately warn investors that did them in:
Analysts believe the disconnect between the executives' public remarks and the bottom lines was the real cause of their departure. Some say more departures are possible.
"Bank CFOs are now being pilloried because of their inability to correctly gauge this shift in the financial markets," said Richard X. Bove, an analyst with Punk Ziegel & Co. Messrs. Graf and Oken "did not provide the appropriate signal to shareholders."
Asian bankers are of course unable to take as much structural rate risk due to the lack of long-term yield curves in most local currencies, but we have still seen some earnings disappointments on the NIM and NII fronts this past reporting period.
]]>Ratings of banks in China and Japan were deemed to already incorporate such an expectation, while those in the Philippines, Indonesia, and India, while also incorporating an expectation of support, were not deemed worthy of upgrade due to the weaker financial condition of their sovereigns.
This seems more like a change of methodology than anything else, as nothing cited here is new at all.
In addition, S&P upgraded 7 Chinese banks on stronger financial conditions and foreign partners.
More after the jump, including list of banks upgraded:
Specific banks upgraded:
Korea:
-Kookmin
-Shinhan
-Woori
-Hana
-Chohung
All to A- from BBB+
Thailand:
-BBL (BBB- to BBB+)
-BAY (BB+ to BBB-)
-KBank (BBB- to BBB)
-KTB (BB+ to BBB-)
-SCB (BBB- to BBB)
-TMB (BBpi to BBBpi)
Malaysia:
-Bumi-Commerce (BBB to BBB+)
-RHB Bank (BBB- to BBB)
Taiwan:
-Chiao Tung Bank (A- to A)
-Chinatrust (BBB+ to A-)
-First Cml (BBB to BBB+)
-ICBC (A- to A)
-Land Bank (A- to A)
China:
-BOC (BBB- to BBB+)
-CCB (BBB- to BBB+)
-ICBC (BBB- to BBB+)
-ABC (BBpi to BBBpi)
-BoComm (BB+ to BBB-)
-CITIC Group (BB to BB+)
-Guangdong Dev Bank (CCCpi to Bpi)
BEA says that it has been circling several mainland banks, but without success so far. GM Raymond Yu feels that it's early days in China, and doesn't seem to feel any pressure to be a first mover - in fact quite the opposite:
"There's no need to worry, each foreign bank can only partner with two local players. HSBC is out of the game," he said.
The Standard article notes that BEA would like to buy 19.9% (the maximum) stakes in two city commercial banks: one in the north and one in the south, but so far seems to have lost out in the bidding for Nanjing CCB (likely to BNP) and Minsheng Bank.
GE Capital has joined Newbridge by taking a 7% stake in Shenzhen Development Bank, the first such China investment for the global finance company. We suspect that this investment will take the form of approximately $100m in primary shares, which will bolster the bank's capital. As Newbridge already controls close to 18% of SDB, it will also mean the bank is effectively at its 25% foreign ownership limit for now, although we also expect that this could be more flexible for SDB given that Newbridge already has effective management control.
Note that per GE's last presentation on Asia, they actually seem more focused on India and SE Asia in the consumer finance arena, meaning that we might see more deals in those markets soon.
]]>